Korea Seeks Rare Earth Opportunities Beyond China... Can It Turn the Niche into an Advantage? [Mineral Industry War] ③

Targeting Opportunities Through Processing and Recycling
Defense and Eco-Friendly Markets Present New Avenues
Price Is Key, "Government Support Is Essential"

Editor's Note
The global competition for critical minerals is becoming increasingly fierce. Minerals essential for future industries such as electric vehicles, semiconductors, robots, wind power, and the defense industry are now strategic assets that determine not only industrial competitiveness but also national security—they are no longer just basic raw materials. Nations are restructuring supply chains around their own interests, extending from mining and refining to material production and recycling, effectively engaging in a “mineral war.” In particular, the United States, Europe, and Japan are accelerating efforts to establish production bases and supply chains among ally countries outside China, in response to China’s dominance in the supply of key minerals such as rare earth permanent magnets, lithium, nickel, and graphite. Korean companies, too, are expanding their business areas from securing overseas resources to refining, material production, and recycling, jumping into a battle for survival. Over the course of five articles, The Asia Business Daily will examine the competition among major nations over critical mineral supply chains, domestic companies’ responses, and the survival strategies of Korea, a nation scarce in resources.

Some experts argue that, to reduce dependence on China in the rare earth supply chain, a diversification strategy that can withstand supply shocks is needed rather than complete substitution. Attention should be focused on the separation and refining of non-Chinese-origin materials and recycling of end-of-life products, while targeting defense and advanced industries, where supply stability is crucial. Initial government support for production costs and expanded corporate stocks and public reserves are also necessary.

Because Korea lacks large-scale rare earth mines, it should utilize its strengths in downstream industries such as materials, chemicals, metalworking, and precision manufacturing, rather than competing on price with China. Jang Sangshik, Director of the International Trade and Commerce Research Institute at the Korea International Trade Association, said in a call with The Asia Business Daily on September 18, "In the short term, Korean companies face limits in securing price competitiveness." He added, "However, considering concerns about unstable supply and prices, it is necessary from a mid- to long-term perspective for our companies to ensure supply stability by entering this sector."

Supply Chain Diversification through Non-Chinese Processing and Recycling

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For Korean companies, an area offering immediate potential is processing and recycling using non-Chinese raw materials. This involves refining or separating rare earth elements from raw materials secured from overseas mines, or recovering rare earths from end-of-life products.

The key is to secure raw materials, stable buyers, proven technology, and stable pricing all at once. Director Jang noted, "The crucial factor is whether our companies can secure non-Chinese raw materials and stable buyers, and maintain operations even if China lowers prices." He added, "Proving the capability of stable mass production is also important."

Although Korea possesses relevant technologies domestically, it has lacked the demonstration and commercialization infrastructure needed to connect R&D efforts to real-world production. Kim Hongin, Director of Resource Utilization Research at the Korea Institute of Geoscience and Mineral Resources, said, "We have long had the technology, but have lacked demonstration capabilities." He continued, "If companies can secure both raw materials and commercialization technologies, and if prices remain above a certain level, the business can become viable."

Recycling can help compensate for Korea’s limited access to raw materials given the absence of large-scale mines. However, it is difficult to secure a stable supply because spent rare earth magnets are dispersed across electric vehicles, wind turbines, and electronic devices, and the cost of recovery is high.

Lee Sangdon, Professor of Environmental Engineering at Ewha Womans University, said, "An assessment of the entire life cycle—from product manufacturing to disposal and recycling—could change the environmental and economic value of recycling." He added, "There is a need to consider providing economic incentives to recycling companies."

Competing on 'Supply Stability' in Defense and Eco-friendly Markets

It is difficult to compete by merely producing cheaper goods than China. Analysts suggest that targeting defense and advanced industries, where stable procurement is more important than price, and differentiating through eco-friendly and high-efficiency processing, will be key. Increased demand for non-Chinese supply chains due to decoupling regulations in major countries also presents opportunities.

Director Kim stated, "It is not easy to compete with China on price, but refining through stable and eco-friendly processes is a way for us to compete."

An official from LS Cable commented, "With major countries such as the United States introducing the Inflation Reduction Act (IRA) and the EU enacting the Critical Raw Materials Act (CRMA), global automakers and advanced tech companies are in urgent need of partners who have established value chains independent of China," adding, "A 'supply stability premium' is now being recognized."

Preparing for Supply Chain Shocks with Government Support and Stockpiling

The non-Chinese rare earth supply chain is difficult to sustain through private sector investment alone. The government must support initial production with financial, facility, and pricing support, and arrange stable buyers through long-term purchasing agreements. As supply chain diversification takes time, it is also necessary to expand corporate inventories and government reserves to buffer short-term shocks to supply and demand.

This year, the government designated 17 rare earth types as critical minerals and increased the overseas resource development loan budget to 67.5 billion won. Investments in domestic production facilities, resource recycling, and R&D fund creation are also underway.

Lee Joon, Head of the Strategic Industry Research Center at the Korea Institute for Industrial Economics and Trade, stated, "We cannot completely disengage from China," and added, "Policy should focus on how quickly we can recover when shocks occur even while maintaining current supply chains in a stable way."

This content was produced with the assistance of AI translation services.